Challenges Of Entrepreneurship
Entrepreneurship in emerging countries encounters a significant number of obstacles compared to developed countries. Challenges for entrepreneurs are different given the strong institutional voids that developing countries have.
A key player that interacts on a daily basis with any entrepreneur is the government. Given the fact that governments seek economic growth, the reduction of unemployment rates, and social welfare for the community (Riberiro-Soriano & Galindo-Martín, 2012), the relationship between, both the government and entrepreneurs, is in theory a win/win scenario; nevertheless this is not always the case.
Governments worldwide are increasingly recognizing the impact of entrepreneurship and are adopting an active …show more content…
A way to understand the governmental influences mentioned above and the impact that they have on entrepreneurs, is through institutional theory. Institutional theory offers a framework to better comprehend the entrepreneurial evolving landscape, in which the government plays a role of great relevance (Riberiro-Soriano & Galindo-Martín, 2012). When there are institutional voids, (Broadman, y otros, 2004) growth is hindered by a lack of institutions protecting intellectual rights, thus discouraging a competitive landscape.
In order to overcome institutional voids caused by the absence of formal institutional infrastructure, entrepreneurs depend on relational governance and informal ties (Khanna & Palepu, 1997). Informal institutions of this kind may include building relations with high-ranked government officials (Peng & Luo, 2000), which might be useful in these environments, nevertheless this solutions end up being costly to companies and influence in a negative way the whole start-up landscape (Huang, 2008; Rajan & Zingales, 1998). On this regard Soto (2000) states that entrepreneurs are dispirited about starting new ventures when there are no formal …show more content…
(2010) state that even though the resource-based theory (Barney, 1991) has been key for the understanding of entrepreneurship, it has become evident that not only resources explain the success of a venture; other elements such as the legal environment, culture, economic incentives, and historical events in an industry may impact entrepreneurs and their success. Following this line of thought, entrepreneurs may be enabled or constrained by the institutions that surround them (Ahlstrom & Bruton, 2003).
Aligned to this reasoning, Battilana, Boxenbaum & Leca, (2009) believe that the concept of institutional entrepreneurship is key to understand institutional theory. They suggest a framework which describes institutional entrepreneurs as change agents who initiate divergent changes. These changes break the institutional status quo in a certain field, and increase the probability of contributing to a transformation of existing institutions or the creation of new